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Saturday, January 13, 2018

MOFALD has allowed local governments to award hydropower project developer license for up to one megawatt and monitor the projects. Local governments could issue project licenses for up to 1MW after technical clearance from the Department of Electricity Development. The local councils, however, will not need clearance from the department when they draft laws and policies to govern the hydropower sector. The Local Governance Act-2017 has given authority to 753 local bodies to issue permits for hydel project development in their areas.

Nepal has ended its sole dependence on Indian companies for internet connectivity by opening up links to Chinese companies. Nepal Telecom and China Telecom Global launched their services after they wrapped up the laying of optical fiber cables between Kerung in China and Rasuwagadi in Nepal, about 50-km north of Kathmandu. The optical cables from China are connected to the optical fibre hub of Nepal Telecom at Sundhara, Kathmandu. From Sundhara, the state owned telecom service provider of Nepal will provide internet service to its customers all over the country.

Currently, the speed of Chinese fiber link via Rasuwagadhi border will be 1.5 gigabits per second per second (gbps) in the initial phase. Nepal is receiving up to 25 gbps from India. Nepal has optical fiber link with India through Bhairahawa, Birgunj and Biratnagar. More than 60 percent of Nepal’s 28 million people had access to the internet in 2017, up from just 19 percent in 2012.

More than 1.55 million tourists visited Lumbini in 2017, representing a 20.75 percent increase. Among them, 1.25 million were domestic visitors, and 301,240 foreign visitors (including 155,444 Indian visitors).

There were 48,528 visitors from Sri Lanka, Thailand (27,603), Myanmar (21,531), China (15,770), South Korea (5,103), Vietnam (5,043), Bhutan (2,278), the UK (1,677), Germany (1,636) and Australia (1,625). Tourists from 87 countries made the trip to Lumbini last year. A majority of foreign tourists visiting Lumbini are handled by Indian tour operators. They enter Lumbini overland from across the Indian border, and spend a few minutes looking around.

Many companies around the world are looking to India for a repeat performance of China’s middle-class expansion. India is, after all, another country with 1.3bn people, a fast-growing economy and favourable demography. And China’s growth is flagging, at least by the standards of the past two decades. Companies which made a packet there, both incomers such as Apple and locals like Alibaba, are seeking pastures new. Firms that missed the boat on China or, like Amazon and Facebook, were simply not allowed in, want to be sure that they do not miss out this time.

But for some of the firms trying to tap this “bird of gold” opportunity, as McKinsey once called it, an awkward truth is making itself felt: a lot of this middle class has little money to spend. There are many rich people in India—but they number in the mere millions. There are a great many more who have risen above the poverty line—but not so far above it that they spend much on anything other than feeding their families. And there is less in between the two than meets the eye.

In dollar terms, growth in Indian e-commerce in 2017 was comparable to a week or so of today’s growth in China. India’s mean GDP per head is just $1,700, and 80% of the population makes less than that. Adjust for purchasing-power parity by factoring in the cheaper cost of goods and services in India and you can bump the mean up to $6,600. But that is less than half the figure for China and a quarter of that for Russia. Only 78m Indians are making close to $10 a day (250,000 rupees annually). To get in the top 1% of earners, an Indian needs to make just over $20,000. Adjusted for purchasing-power parity, that is a comfortable income, equating to over $75,000 in America. India’s middle class may be far from wealthy but the rich are truly rich. There are over 200,000 millionaires in India.

Another gauge is whether people can afford the more basic material goods they crave. For Indians, that typically means a car or scooter, a television, a computer, air conditioning and a fridge. A government survey in 2012 found that under 3% of all Indian households owned all five items. The median household had no more than one.

Over 90% of workers are employed in the informal sector; most firms are not large or productive enough to pay anything approaching middle-class wages. Poor diets mean that 38% of children under the age of five are so underfed as to damage their physical and mental capacity irreversibly.

Whether India’s consumer class numbers 24m or 80m, that is more than enough to allow some businesses to thrive—plenty of fortunes have been made catering to far smaller places. But businesses assuming the consumer pivot in India is the next unstoppable force in global economics need to ask themselves why it already looks to have run out of puff—and whether it is likely to get a second wind any time soon.

Rising food prices pushed India’s retail inflation in December to 5.21%, intensifying pressure on RBI to raise policy rates in the next few months. India’s factory output growth leapt to a 17-month high in November, partly the effect of a lower year-ago base in the aftermath of demonetisation, and retail inflation also quickened to a 17-month high, confirming that an economic recovery is underway amid rising price risks. The economy has been hurt by the lingering impact of the invalidation of high-value banknotes in November 2016 and disruptions caused by the goods and services tax, introduced on 1 July.

About

Formerly, economics officer at Asian Development Bank, Nepal Resident Mission. Worked as a researcher at SAWTEE, Kathmandu. Also, worked as a consultant for Ministry of Commerce & Supplies, Government of Nepal; FAO; UNDP, GIZ-CIM, and ADB among others. I was an op-ed columnist for Republica between December 2008 – June 2012. I also worked as a Junior Fellow for Trade, Equity & Development program at Carnegie Endowment for International Peace, Washington, D.C .